Peter Schiff speaks at the 2016 FreedomFest, Planet Hollywood, Las Vegas, Nevada. Photo: Gage Skidmore / Flickr / Creative Commons https://www.flickr.com/photos/gageskidmore/27760805954 Gold bars are stacked in a vault at the U.S. Mint, in West Point, N.Y., July 22, 2014 (AP Photo/Mike Groll, File)
Gold trader Peter Schiff says the U.S. government has inflated the mother of all bubbles and is now a sitting duck as inflation rises and heightened debt levels threaten the world’s largest economy.
The president of Euro Pacific Capital, Schiff said the Federal Reserve is unable to raise interest rates to tame rising inflation as the economy opens and covid-19 vaccinations help lift consumption. Hiking interest rates could “stop the party” and “pop the bubble,” leaving the economy and financial systems exposed to the risk of depression.
“The economy and financial system are more fragile than the public thinks,” Schiff said in his podcast. “Normalizing interest rates by raising them to slow down inflation comes with the risk of bursting the bubble economy that is loaded with debt and leverage.”
Schiff is famous for predicting that the collapse of the housing market in 2008 would lead to a global financial crisis.
Fed Chairman Jerome Powell has downplayed inflation risk on the U.S. economy even as several indicators and prices continue to spike.
The Fed has refrained from hiking interest rates despite inflation projected to exceed the 2 percent target it set for the economy, saying it will let price growth run hotter than usual in hopes of driving a stronger recovery and tighter labor market.
The Fed’s last set of quarterly economic projections places its first interest-rate hike sometime after 2023.
“How can we expect a return to a normal monetary policy when asset prices, debt levels and federal budget and international trade deficits are abnormally high? Our bubble economy can’t survive normal interest rates,” Schiff tweeted. “Abnormally high inflation is the only politically viable option.”
Most economists are worried about U.S. inflation being persistent. Companies including billionaire Warren Buffet’s Berkshire Hathaway say serious levels of inflation are starting to take hold in the U.S. economy.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
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